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History lesson: Apple vs. Microsoft reorganizations

Microsoft’s latest company-wide reorganization was revealed Thursday with a memo released to the employees. The plan is called “One Microsoft.”

In a posting on the Monday Note blog, Jean-Louis Gassée discussed Microsoft’s moves from a divisional to a functional organization and the creation of functional groups that will hopefully work together to execute on a new “devices and services” strategy.

He compares Microsoft’s reorganization with Apple’s massive Black Friday layoffs that started in mid-March 1997 and runs down the differences between Apple back then and Microsoft today. And then there’s the run of successes from Apple over the past decade. But Apple’s problems back then were nothing compared with Microsoft today.

I greatly admire Ballmer’s determination to never give up, never admit failure, always look forward, attitudes that are well-served by his imposing physical presence, impeccable speech, and unshakable composure. But this change isn’t the sort of organizational tune-up that he has perfected over the last three years, it isn’t another iteration of spring cleaning that has resulted in the high-level departures of Robbie Bach, Ray Ozzie and, earlier this year, Steven Sinofsky (who was found guilty of Windows 8).

Removing a loyal but obdurate contradictor, sanctioning bad performance and foul politics is one thing. Reshaping the culture of a huge organization (97,000 employees) is a qualitatively and quantitatively different task. Habits of the mind and, even more challenging, of the heart are extremely hard to change. And, certainly, Microsoft’s culture needs an overhaul. It has caused the company to miss or mishandle Search, Social Networks, Advertising, Smartphones, and Tablets, and to make a meal of the latest version of their iconic Windows product.

Of course, execution is and has been a critical problem at every level of Microsoft, from Ballmer down to the lowest-level manager. Even Ballmer had to address it in his memo — somewhat.

It is also clear to me and our leadership that we must do an extraordinary job to succeed in this modern world. We have delivered many great products and had much success in market, but we all want more. That means better execution from product conceptualization and innovation right through to marketing and sales. It also means operational excellence in cloud services, datacenter operations, and manufacturing and supply chain that are essential in a devices and services world. To advance our strategy and execute more quickly, more efficiently, and with greater excellence we need to transform how we organize, how we plan and how we work.

The vision appears to be clear to Ballmer at least. Still, it took him some 2,700 words to communicate it, which must stand as another example of Microsoft’s problems. He and his minions have been hard pressed to execute on any strategy in the past decade or so. Dare I remind readers of Longhorn and the first, problematic release of Vista? With a track record as spotty as theirs, can this new excellence push really be trusted?

At Monday Note, Gassée also wondered what will happen if Microsoft can’t get back the market back on the traditional, cyclical upgrades.

The company was reasonably prosperous even before DOS/Windows and Office, but its never-before-seen riches came from a division of labor: PC OEM vassals were left to fight among themselves for market share while the licensing overlord enjoyed monopoly pricing for its Windows + Office sales. (When Ballmer cheekily says ‘We’re all about choice’, he means the choice between PC makers racing to the bottom, not choice between Windows/Office and alternatives.)

He warned that the traditional Microsoft business model is weakened by Apple and Android tablets. It’s caught in a cascading failure of its revenues, particularly, in the higher-margin server products in the enterprise. “The once powerful tie-in between Windows and Office now turns against Redmond,” he wrote.

I take issue with Gassée and other’s shorthand Apple history. For them, there’s the return of Steve Jobs to the company in 19997 and then iPod/iTunes, Apple Stores, iPhone, App Store, iPad, etc. There are historical gaps here and there, many spanning years.

Gassée boils down the differences between then and now, Apple and Microsoft, into three bullet points:

1) That “Apple was on the ropes” and this cleared executive minds for serious cuts and strategy revisions.

2) That Apple’s business was “simple,” comprised of Macintosh computers.

3) Steve Jobs returned and brought order and reason to the company.

I agree that Apple was on the ropes, with its developers and installed base. However, Apple’s business was not so simple, it sold all sorts of branded hardware and software packages, from cameras to printers, hard drives and servers, peripherals of all sorts.

My MacWEEK colleague, the late Don Crabb, wrote a special opinion piece on Black Friday, March 14, 1997. He said it was the dreaded corporate reorganization “that must define a corporation that can sell computers, service customers and make money.” He said indeed, Apple had executed a reorg worthy of the name.

All the rest of the hardware it can either (a) outsource to an OEM (like printers, scanners and digital cameras), (b) dump entirely because it should never had gotten into the silly business in the first place (like Apple-manufactured hard drives, network hubs and routers, external CD-ROM drives, and piles more hardware flotsam that lose money), or (c) measure its strategic value and leave it alone (like Newton and eMate – where it continues the effort but considers spinning off the division as development continues).

This came to pass as Crabb predicted.

On that day, I wrote a story detailing some of the major projects that were cut and spared. Many units, such as Apple Imaging, weren’t cut completely on the day, but were jettisoned over the course of a year or two. Longtime Mac fans will remember the OpenDoc and Cyberdog component-software architecture; HyperCard; Copland and QuickTime Conferencing. What nostalgia.

Apple didn’t turn on a dime. It all took years. Apple refined its hardware operations and carried on development of Mac OS software while refining the NeXT OpenStep-based Rhapsody into an operating system that would be acceptable for actual work and to the installed base of Classic Mac users. And all that effort set the table for the consumer devices that now dominate the market.